Job Work provisions [Rule 4(5) and 4(6)] :
(1) Credit allowed on inputs sent to job-worker when the same are received back within 180 days: CENVAT credit on inputs can be availed even if any inputs as such or after being partially processed are sent to a job worker and from there subsequently sent to another job worker and likewise, for
• further processing,
• testing,
• repairing,
• re-conditioning or
• for the manufacture of intermediate goods necessary for the manufacture of final products or
• any other purpose.
Such credit will be allowed only if it is established from the records /challans/ memos/ or any other document produced by the manufacturer/ output service provider taking CENVAT credit that the inputs or the products produced therefrom are received back by the manufacturer/ output service provider within 180 days of their being sent from the factory/premises of output service provider, as the case may be [Rule 4(5)(a)(i)].
(2) Credit allowed on capital goods sent to job-worker when the same are received back within 2 years: CENVAT credit on capital goods can be availed allowed even if any capital goods as such are sent to a job worker for
• further processing,
• testing,
• repair,
• re-conditioning or
• for the manufacture of intermediate goods necessary for the manufacture of final products or
• any other purpose.
Such credit will be allowed only if it is established from the records, challans or memos or any other document produced by the manufacturer /output service provider taking the CENVAT credit that the capital goods are received back by the manufacturer /output service provider, as the case may be, within 2 years of their being so sent [Rule 4(5)(a)(ii)].
(3) Credit allowed on inputs or capital goods sent directly to job-worker: The credit can be availed even if any inputs or capital goods are directly sent to a job worker without their being first brought to the premises of the manufacturer/ output service provider and in such a case, the period of 180 days or 2 years, as the case may be, will be counted from the date of receipt of such goods by the job worker [Provisos to rule 4(5)(a)(i) and (ii)].
(4) Credit to be reversed when inputs and capital goods sent to job-worker are not returned within 180 days and 2 years respectively: If the inputs or capital goods are not received back within 180 days and 2 years respectively, the manufacturer/ output service provider will have to pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise. However, such credit may be retaken once the inputs or capital goods are received back in the factory/ premises of the output service provider [Rule 4(5)(a)(iii)].
(5) Credit allowed on jigs, fixtures, moulds and dies sent to another manufacturer/job worker without the condition of being returned in 180 days: Sub-rule (5)(b) extends the CENVAT credit in respect of jigs, fixtures, moulds and dies sent by manufacturer of final products to:-
(a) another manufacturer for the production of goods, or
(b) a job worker for the production of goods on his behalf
according to his specifications.
Since these items are consumables in nature, it is obvious that the same cannot be received back in the factory of the manufacturer. Therefore, credit is allowed on such items without any condition of reversing the same after the expiry of 2 years.
(6) Direct dispatch of final products from job-worker’s premises: Sub-rule (6) allows direct dispatch or clearance of final products from job worker’s premises subject to the approval of Deputy Commissioner of Central Excise or Assistant Commissioner of Central Excise, as the case may be, in each such case of removal. This approval can be granted on an annual basis to each job worker. The direct dispatch is to be carried out as per the conditions imposed by such Deputy/Assistant Commissioner of Central Excise.
For instance, when the job worker is in Bangalore, principal manufacturer is in Delhi and customer in Chennai, it may be practical to get authorization to remove the finished goods directly from Bangalore to Chennai.